Chicago Board of Trade Market News
Outlook: As expected, USDA reduced U.S. corn exports, increased the volume used for ethanol and increased the carryout for corn both nationally and globally in the most recent WASDE:
- 25 million bushel increase in corn for U.S. ethanol to 5.2 billion bushels;
- 50 million bushel reduction in U.S. corn exports to 1.75 billion bushels;
- 25 million bushel increase in the U.S. corn carryout to 1.785 billion;
- 1 million bushel increase in U.S. ending supplies for both barley and grain sorghum;
- 1 MMT reduction in world corn production to 973.9 MMT;
- 1 MMT reduction in world corn consumption;
- 1.5 MMT reduction in world corn exports.
The boost in corn use for ethanol was smaller and the export decrease was probably larger than most expected, although not by enough to be called surprising. In fact, while USDA moved some numbers they were all quite modest and reinforced the market view that the December report each year is the “dullest and least important.”
Brazil’s corn export forecast was raised to a record 32 MMT and competition from other suppliers will grow stiffer for February-forward. This is why Tommy Grisafi of Advance Trading is quoted advising that U.S. corn will have to get marketed below the cost of production. At this juncture, farmers are holding on to the largest long position in the market. The problem is continuing limited demand out of Asia.
If there is a bright spot, it is the malt barley market. Rabobank projects that demand will grow 14 percent over the next five years, mostly in emerging markets as consumption of beer, and particularly higher quality beer, continues to rise. Prices have been volatile as malt quality premiums get bounced around by weather events, but major growth markets willing to spend the money include India, Brazil and Mexico. The question is how much lower prices for other crops tempt more farmers into growing malt barley, and if it does, will it reach a point where malt and feed barley prices converge?